Friday’s cautious mood led to yield drops and fueled USD, gold prices amid growing concerns about Russia-Ukraine conflict.
The bond coupon debates surrounding Fed’s March 50bp rate-hike will also be analyzed in FOMC Minutes
Gold Weekly Outlook: Has gold finally recovered its inflation-hedge status.
Update: Gold (XAU/USD), is at $1,858, flat in Asia. This was due to jittery markets in the beginning of the week. The yellow metal is still close to its 3-month high as investors seek safety amid warnings from the United States about Russia’s possible invasion of Ukraine.
Moscow denies any invasion plans and accuses the West of “hysteria” despite the presence of over 100,000 troops in the vicinity of Ukraine. Markets are anticipating dangerous times, which could underpin the US dollar and the yellow metal. Analysts at TD Securities stated that gold prices will likely succumb to the significantly higher real rates and a hawkish regime at Fed if there is no sustained buying flow.
The Federal Open Market Committee minutes will be monitored for the next week. Traders will also be closely following any discussions about near-term policies. Analysts from TD Securities stated that the market will pay particular attention to plans for balance-sheet normalization steps following the Jan release of the normalization principles.
End of the update
The Gold (XAU/USD), prices fluctuate around the three-month high that was flashed yesterday, and climbed to $1,860 Monday’s quiet Asian session.
After receding probabilities about Fed’s 0.50% rate hike, supported by softer US data, and widespread fears of Russia’s imminent invasion of Ukraine, the yellow metal rose Friday to its highest level since October 2021.
CME FedWatch Tool predicts 50-50 probabilities of 50 basis points (bps), of a Fed rate-hike in March, versus a move of 0.25%. The market seemed almost certain that the Fed would raise rates, particularly after the release of the US Consumer Price Index(CPI). However, preliminary readings of US Michigan Consumer Sentiment for February fell from 67.2 to 61.7 Friday.
The US also warned about Moscow’s plans for an immediate war with Ukraine, and asked all its citizens to flee Kyiv. UK and Eurozone policymakers also mentioned Russian preparations for war. The AFP news quoted Vladimir Putin, a Russian leader, as saying to Emanuel Macron that Ukraine’s invasion claims are ‘provocative speculation.
The US 10-year Treasury yields fell over 11.0 basis points (bps), while Wall Street benchmarks suffered heavy losses as a result of the risk-aversion wave. S&P 500 Futures could also show the sour mood, dropping 0.15% at the most.
Gold traders will be watching closely for clues from the Russia/Ukraine story as well as Fed’s rate-hike worries. This week’s FOMC Minutes is a key event to keep an eye on, while geopolitics will provide fresh inspiration.
Analyse technique
Friday’s gold prices saw the largest daily jump in 4 months. Buyers cheered rising geopolitical tensions around Russia and inflation woes.
The run-up reached a new high of 2022 and also crossed the downward trend line that was established in June. The latest upside is likely to continue due to the positive MACD and RSI conditions that support gold buyers.
A horizontal area that includes multiple levels, marked since May, at $1,873, will serve as a critical upside barrier to allow the metal to pass before it reaches the $1,900 threshold.
If gold buyers hold on to their reins beyond $1,900, then the mid-2021 high of $1,917 in the vicinity will be in focus.
A trend line that is upwardly sloping from February 03 to $1,821 or the 200-DMA level at $1,807 limits short-term gold declines.
If gold prices fall below $1,807 the $1,800 round figure or $1,760 will be available to the seller.
